The world of university finances explained, Part One

With the latest unemployment numbers still hanging above seven percent and the economic outlook of the country uncertain, college is one of the biggest and most influential investments for any high school graduate.

Even after understanding the benefits of a bachelor’s degree and all that John Brown University has to offer, it can still be hard not to balk at the $30,996 sticker price. With an average annual cost increase of 4.69 percent over the past five years, it’s not getting any cheaper either.

The good news is many students end up paying considerably less than the 2013-2014 total cost. According to Kim Eldridge, the associate vice president of admissions and financial aid, the University budgeted to give back 38.5 percent of this year’s tuition dollars in what is termed the unfunded tuition discount.

“We take tuition revenue and for the undergraduate traditional student, we convert some of that back into scholarships,” he said. “That’s where the bulk of [financial aid] comes from. It’s called discount, because we’re really just discounting tuition.”

That 38.5 percent unfunded tuition discount totaled about $11.5 million, according to Eldridge. The discount rate had been just above the 30 percent mark until the 2008 recession, which forced the University to raise the discount rate in an effort to keep enrollment steady.

Compared to other Christian colleges and universities in the nation, John Brown University is below the 2011-2012 average tuition rate. The Council for Christian Colleges and Universities publishes a tuition survey each year, comparing every member school. The 2011-2012 average is the latest tuition data available for comparison.

John Brown University was ranked 75th out of 109 in the tuition survey. Tulsa, Okla., based Oral Roberts University’s tuition was nearly identical, but earned a spot lower. Oklahoma Christian University in Edmond was ranked at 90, which represents about $2,300 less in annual tuition costs.

Steve Beers, the vice president for student development, athletics and facility services, is confident in John Brown University’s tuition rates.

“Our rank at 75 out of 109 says that we’re actually one of the least expensive Christian colleges in the nation,” he said. “Yes, there are some cheaper schools, but they’re nowhere near the quality that we are.”

According to data provided by Kim Hadley, the vice president for finance and administration, the University has three main sources of tuition revenue, undergraduate, graduate and degree completion. For the past fiscal year, which ended on June 31, total tuition revenue was a little over $35 million.

“Of the combined gross revenue, about $28 million was generated through the traditional undergraduate program…” she said in an email statement. “The graduate program contributed $3.5 million of gross revenue, and degree completion generated just under $4 million.”

The University’s undergraduate tuition revenue came to $16.5 million after the tuition discount and other scholarships, which equaled 53 percent of the University’s undergraduate revenue sources. Another major source is room and board, which generates 25 percent of revenue from traditional four-year students. The rest of the University’s income comes from tuition from non-traditional students, charitable contributions, endowment funds and other sources.

Another significant part of the University’s funding is endowment funds, which are investment accounts mostly funded by donations and are often restricted for certain uses like scholarships or buildings. According to Hadley, John Brown University’s endowment funds totaled just under $80 million last summer, which has more than doubled in 10 years.

The University’s seemingly large endowment shrinks by comparison to some schools in the region, like College of the Ozarks with $298 million and Hendrix College banking almost $158 million in the 2011-2012 fiscal year. A more similar university in size, Ouachita Baptist University in Arkadelphia, Ark., had $86.4 million put away in endowment.

According to Hadley, 44 percent of the University endowment funds are restricted for scholarships. This money provides scholarships to students from the interest earned and market value gains, averaging a $1,240 award per full-time student for the 2011-2012 school year. This was far beyond the average Christian college or university award of $305 per student in the same year.

Portions of the endowment funds are restricted either by donors or the board of trustees for a certain purpose. Endowment for general University operations is 28 percent of the total fund. The Center for Relationship Enrichment and the Soderquist Center share 18 percent of the endowment, while 9 percent is restricted to facility operation costs.

The 9 percent dedicated to buildings helps cover the cost of custodial and maintenance, utilities, and other costs, according to Don Crandall, vice president for enrollment management. The upkeep isn’t the only thing that donations have paid for, either.

“All the new buildings that you see around campus are fully funded by outside gifts, by people who believe in the mission of the University,” Crandall said. “So students aren’t paying for those buildings in any way out of their tuition dollars. Those dollars are going towards programs and faculty salaries…even though our facilities have been improving over the last several years.”

According to the University’s fact sheet, 60 percent of its buildings are either new or have been renovated in the last 10 years.
What do all these numbers mean? Knowing the University has a nearly $80 million endowment doesn’t help the average student know if they’re trusting the right school with their money.

Forbes magazine created a financial grading system for more than 900 four-year, private, not-for-profit schools, which measures financial fitness by looking at nine components, including things like balance sheet health and instructional expenses per full-time student.

John Brown University received an A-, ranked at 110 out of more than 900 schools. Some top institutions in the list included Harvard, Princeton and Stanford, all rated A+. Other Christian universities in the region, like Oral Roberts University and Ouachita Baptist got a B grade. Oklahoma Christian University in Edmond trailed with a D.

In part two of the Threefold Advocate’s look behind John Brown University’s finances, we will focus on expenses and scholarships.